Dutch parties close in on budget deal

AMSTERDAM (Reuters) - Dutch politicians closed in on a deal on a 2013 budget that would cut the deficit and were taking it to their political parties for approval, sources said on Thursday.

A finance ministry spokeswoman told Reuters that Finance Minister Jan Kees de Jager believed a deal was possible with opposition parties to cut the government's budget deficit "within reach" of a 3 percent target next year.

"It is not yet the end of the race. The parties will now go back to their own factions," ministry spokeswoman Simone Boitelle said.

A spokesman for the minority Christian Union said a budget had been put together and it was now being discussed by party members.

The Dutch caretaker government was scrambling to cut strike a deal with opposition parties before a Europe Union deadline on Monday.

Failure to come up with one would lead to uncertainty until elections in September, adding to existing angst in financial markets about the sustainability of Spanish and other euro zone debt.

Prime Minister Mark Rutte's government fell apart at the weekend when its main ally, Geert Wilders' Freedom Party, refused to agree to a deal that would cut more than 14 billion euros ($18 billion) off the annual budget and bring the deficit down to the EU limit of 3 percent of domestic output next year.

Among the opposition, some small parties would also like to reduce the deficit to 3 percent but the largest opposition parties, including Labour and Wilders' Freedom Party, had said 3.6 or 4 percent was good enough and cutting more would hurt growth and jobs.

Labour leader Diederik Samsom was "willing to move", his spokeswoman said earlier. On Tuesday, Samsom said his party wanted more time to reduce the deficit to 3 percent.

Financial markets have been unsettled by the inability of one of Europe's few remaining AAA-rated countries to agree the sort of deficit-cutting it has demanded from other governments.

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A Dutch impasse could have an impact on budget discipline elsewhere in Europe.

"There is a risk you immediately start watering down the rules of the game. The Netherlands has a role in this but, more important will be the direction in France," ING economist Maarten Leen said.

French voters seem poised to chose economic growth over austerity by voting for Socialist presidential candidate Francois Hollande over conservative President Nicolas Sarkozy on May 6.

Until now, the Dutch have been among the most hardline euro zone members in calling for fiscal discipline. De Jager, has loudly berated "budget sinners" in Europe for letting debt run up,

"It was the Netherlands which has always pushed euro zone countries not to exceed that budget deficit level," German Finance Minister Wolfgang Schaeuble was quoted as saying in Dutch daily De Telegraaf. "There has to be a sound budget, coupled to fiscal discipline."

The Netherlands, which has a relatively low level of state debt of 65.2 percent of GDP, has been in recession since July, and the budget deficit is expected to be 4.6 percent of GDP next year without spending cuts.

As elsewhere in Europe, there is public discomfort with sharp austerity.

A poll by Maurice de Hond showed 58 percent of those surveyed agreed the Dutch deficit should be cut to 3.5 percent at the most, while 44 percent thought it should be cut to 3 percent or lower.

"We want harmful spending cuts off the table and want to make steps to a sustainable economy. We now think it (a deal) is now good enough to present it to the faction," GreenLeft leader Jolande Sap told reporters.